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Climate Change and Labor Reallocation: Evidence from Six Decades of the Indian Census

2023; American Economic Association; Volume: 15; Issue: 2 Linguagem: Inglês

10.1257/pol.20210129

1945-7812

Maggie Liu, Yogita Shamdasani, Vis Taraz,

Agricultural risk and resilience

How do rising temperatures affect long-term labor reallocation in developing economies? In this paper we examine how increases in temperature impact structural transformation and urbanization within Indian districts between 1951 and 2011. We find that rising temperatures are associated with lower shares of workers in nonagricultural sectors, with effects intensifying over a longer time frame. Supporting evidence suggests that local demand effects play an important role: declining agricultural productivity under higher temperatures reduces the demand for nonagricultural goods and services, which subsequently lowers nonagricultural labor demand. Our results illustrate that rising temperatures limit sectoral and rural-urban mobility for isolated households. (JEL J61, N35, O13, O15, O18, Q54, R23)